Published 08/27/2021 by CIONCA IP TEAM (SE)
Tempnology LLC owned intellectual properties over made specialized products. These products included socks, headbands, towels, and other related accessories. These products were particularly designed to adapt to low temperatures. Even, when used during exercise. Tempnology had a significant intellectual portfolio. This portfolio included patents and trademarks. It consisted of two issued and four pending patents, research studies and series of pending and already registered trademarks. Sometime in November 2012, a company named Mission Products Limited (petitioner) entered a co-marketing and distribution with Tempnology. The agreement involves three core categories of rights.
First, Mission Product Limited distribution rights over certain manufactured products of Tempnology within the United States. The respondent was also granted non-exclusive rights over Tempnology's intellectual property. Second, Mission Products Limited granted a license to use Tempnology’s logo and trademark to sell the products. Although, either party were permitted to end the agreement without cause. In 2014, Mission (petitioner) went into Wind-Down Period. Particularly on July 22 of the same year, the respondent issued an immediate notice of termination. The basis for the cause was that the petitioner hired the respondent's former president, which was contrary to the agreement's restrictive covenant.
A suit ensued in line with the terms of the agreement between the parties. The cause was brought before an arbitrator. The arbitrator gave an arbitral award. In the arbitral award, it was determined that Tempnology had waived any grounds under the restrictive covenant. As a result, they were prevented from immediate termination of the agreement. Therefore, Mission Products Limited’s rights of distribution and trademark over Tempnology’s intellectual property subsisted. Also, Mission could retain the trademark license until the end of the Wind-Down Period. Tempnology proceeded to the Bankruptcy Court. At the court, they relied on section 365 of the Bankruptcy Code to exercise their rejection of trademark licence. Tempnology had victory. At the Bankruptcy Appellate Panel, the decisions of the Bankruptcy Court were reversed. Thus, leading to an appeal by Tempnology before the Court of Appeals. The panel's decisions were rejected on appeal. The grounds for rejection were that a special feature of trademark law is against licensee withholding trademark's right after rejection.
Afterwards was the decision of 8-1 by the Supreme Court in 2019. The decision marked a victory for the trademark licensee.
This decision cements a licensee's trademark even after the rejection of the agreement. Mission Products Holdings had to hold the trademark licence because a debtor’s (Tempnology) rejection of licensing trademark is a breach of section 365 of the Bankruptcy Code.
The case of Mission Products Holdings Inc. v. Tempnology, LLC is relevant today. It redefined the rights of licensees. This is with regards to retaining trademark's rights in bankruptcy cases. Now, negotiating leverage of licenses in bankruptcy are now enhanced. Thus, difficult for debtors to reorganize. According to the Supreme Court, the rejection of executory contracts has changed. Under Bankruptcy Law, it will not constitute termination of the contracts.
Disclaimer: The views and opinions expressed throughout this blog are the views and opinions of the individual author(s) and/or contributor(s) and do not necessarily reflect the views and opinions of our firm, CIONCA IP Law. P.C.
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